Our TRADING BUY stands based on the 2H20 earnings recovery from 1H20 thanks to the eased lockdowns and an attractive valuation—2020 PER of 15.2x against its long-term mean of 21x.
Exceeded our expectations
TFG posted a 2Q20 net profit of Bt431m, down 17% YoY and 33% QoQ. Excluding extra items in 2Q20—Bt102m in FX loss, Bt56m gain on biological assets and Bt18m in reversal of asset impairment loss (from the adoption of TFRS9 accounting)—core profit was Bt459m, down 6% YoY but up 14% QoQ. We regard the 6% YoY drop as modest amid the COVID-19 spread. Net profit beat our model by 69%, due mainly to lower FX loss and higher biological gain than estimated. Core profit exceeded our estimate by 15% thanks to higher GM than assumed. GM surprisingly and significantly beat our model (14.1% in 2Q20 against our 11.7% estimate and 14.2% in 2Q19 and 12.3% in 1Q20). Despite the COVID-19 crisis in 2Q20, the firm could deliver impressively strong GM of the level close to that of 2Q19.